U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period Ended December 31, 1996
Commission File No. 0-16176
ASHA CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 84-1016459
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(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
600 C Ward Drive, Santa Barbara, California 93111
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(Address of Principal Executive Offices including zip code)
(805) 683-2331
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(Issuer's telephone number)
Indicate by check mark whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes [ X ] No [ ]
There were 7,140,507 shares of the Registrant's Common Stock outstanding as of
February 12, 1997.
ASHA CORPORATION
FORM 10-QSB
INDEX
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Part I. Financial Information
Item 1. Financial Statements Page
Balance Sheets - December 31, 1996 and September 30, 1996 3-4
Statement of Operations for the three month periods ended
December 31, 1996 and 1995 5
Statement of Cash Flows for the three month periods ended
December 31, 1996 and 1995 6-7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
Part II. Other Information and Signatures 11
Signatures 12
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ASHA CORPORATION
BALANCE SHEETS
DECEMBER 31, 1996 AND SEPTEMBER 30, 1996
December 31, September 30,
1996 1996
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ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 1,960 $ 13,581
Short-term investments - 247,548
Accounts receivable 1,105,167 1,089,955
Prepaid expenses and other 10,039 64,819
TOTAL CURRENT ASSETS 1,117,166 1,415,903
Property and equipment, at cost
net of accumulated depreciation
and amortization 186,586 203,480
Other Assets:
Market securities 247,548 -
Investments in affiliates 709,098 600,491
TOTAL OTHER ASSETS 956,646 600,491
TOTAL ASSETS $ 2,260,398 $ 2,219,874
The accompanying notes are an integral part of the financial statements.
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ASHA CORPORATION
BALANCE SHEETS
DECEMBER 31, 1996 AND SEPTEMBER 30, 1996
December 31, September 30,
1996 1996
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(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowing $ 831,163 $ 275,000
Accounts payable 180,813 102,262
Accrued liabilities 206,575 108,985
TOTAL CURRENT LIABILITIES 1,218,551 486,247
Stockholders' Equity:
Preferred stock, $.0001 par value:
Authorized - 10,000,000 shares,
no shares issued or outstanding
Common stock, $.00001 par value:
Authorized - 20,000,000 shares,
Issued and outstanding - 7,076,217
shares 71 71
Additional paid-in capital 5,926,457 5,926,456
Accumulated deficit (4,802,774) (4,110,993)
Less: Treasury Stock at Cost (81,907) (81,907)
TOTAL STOCKHOLDERS' EQUITY 1,041,847 1,733,627
$ 2,260,398 $ 2,219,874
The accompanying notes are an integral part of the financial statements.
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ASHA CORPORATION
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
December 31, December 31,
1996 1995
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REVENUES:
License and right of refusal $ - $ 1,326,000
Contract and other services 52,212 -
52,212 1,326,000
OPERATING EXPENSES:
Research and development 256,899 421,577
Officers' salaries 106,300 110,913
Legal and accounting 59,301 30,788
Patent application 1,124 12,508
Taxes and licenses 17,896 21,108
Selling, general and administrative 196,692 282,594
Depreciation and amortization 16,894 12,155
655,106 891,643
(Loss) income from operations (602,894) 434,357
OTHER INCOME (EXPENSES):
Loss from investments in affiliates (108,606) -
Interest and investment income 29,902 2,972
Interest expense (10,182) -
(88,886) 2,972
(Loss) income before provision for
income taxes (691,780) 437,329
PROVISION FOR INCOME TAXES - -
NET (LOSS) INCOME $ (691,780) $ 437,329
NET (LOSS) INCOME PER COMMON SHARE $ (.098) $ .062
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 7,074,673 7,072,111
The accompanying notes are an integral part of the financial statements.
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ASHA CORPORATION
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
December 31, December 31,
1996 1995
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CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $(691,780) $ 437,329
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation and amortization 16,894 12,155
Accrued interest on long-term
receivable (29,617) -
Gain on sale of equipment - -
Loss on investment in affiliate 108,606 -
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable 14,405 119,057
Prepaid expenses and other 54,780 4,679
Increase (decrease) in:
Accounts payable 78,551 81,833
Accrued liabilities 97,590 (7,581)
Net cash (used in) provided
by operating activities (350,571) 647,472
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments - (1,349,404)
Additions to property and equipment - (21,476)
Investment in affiliate (217,213) -
Net cash (used in) investing
activities (217,213) (1,370,880)
The accompanying notes are an integral part of the financial statements.
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ASHA CORPORATION
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(CONTINUED)
December 31, December 31,
1996 1995
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (repayments) under
credit agreements 556,163 (85,000)
Due to related party - 65,000
Proceeds from issuance of common stock - 750,000
Net cash provided by financing
activities 556,163 730,000
Net (decrease) increase in cash and
cash equivalents (11,621) 6,592
Cash and cash equivalents at beginning
of period 13,581 12,804
Cash and cash equivalents at end of
period $ 1,960 $ 19,396
The accompanying notes are an integral part of the financial statements.
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ASHA CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The financial statements included herein have been prepared by ASHA
Corporation, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and include all adjustments which are, in
the opinion of management, necessary for a fair presentation. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The Company
believes that the disclosures are adequate to make the information presented
not misleading; however, it is suggested that these financial statements and
the accompanying notes be read in conjunction with the financial statements
and notes thereto in the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1996. The financial data for the interim periods may
not necessarily be indicative of results to be expected for the year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following should be read in conjunction with the attached Financial
Statements and Notes thereto of the Company.
THREE MONTHS ENDED DECEMBER 31, 1996 VERSUS THREE MONTHS ENDED DECEMBER 31,
1995.
During the three months ended December 31, 1996 the Company had approximately
$52,212 in revenue compared to approximately $1,326,009 in revenue during the
corresponding period last year. The decrease is revenues was the result of a
decrease in license and first refusal revenue. The decrease is due to the fact
that during the three months ended December 31, 1995, the Company entered into
a new option agreement with a major customer and had additional revenue from
engineering services that resulted in substantial revenues. During the quarter
ended December 31, 1996, the Company remained involved with tier one and OEM
testing of its Gerodisc technology and has progressed toward production
discussion, but has not received additional license or option revenue.
Expenses for the three months ended December 31, 1996 were down by
approximately $236,000 over the corresponding period last year. Research and
development expenses decreased $165,000 as a result of the Company's transfer
of technology and fabrication work related to the Jiaxing, China factory as
the ASHA-TAISUN Joint venture continues to develop. General Selling, and
Administrative expenses decreased by approximately $86,000 as a result of cost
cutting procedures taking effect as well as reduced travel.
The net (loss) of $(691,780) for the three months ended December 31, 1996 was
substantially less than net income of $437,329 for the three months ended
December 31, 1995. The decrease was due to reduced revenues and was moderated
by cost savings and reduced fabrication expenses.
LIQUIDITY AND CAPITAL RESOURCES
As of December, 31, 1996 the Company had working capital of approximately
$146,143 compared to approximately $929,656 at September 30, 1996. The
decrease is attributed to extended testing which was required in connection
with potential license agreements.
In November 1996, the Company obtained an increase in its line of credit from
a commercial bank from $500,000 to $750,000.
In January 1997, the Company received approximately $775,000 in net proceeds
from the private sale of units consisting of promissory notes and common
stock.
With the additional cash made available from the increase in the line of
credit and the private offering, the Company believes that it has sufficient
liquidity to maintain the Company's current level of activities for the next
twelve months. However, the Company intends to raise additional funds to
finance additional marketing and other activities.
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In December 1996, the Company entered into a Letter of Intent with an
underwriter concerning a proposed public offering of the Company's Comon
Stock. Under the terms of the Letter of Intent, the proposed offering would
be for at least $6 million in gross proceeds on a "firm commitment" basis.
Such offering is expected to occur during the first half of calendar 1997,
subject to a number of contingencies including a registration statement to be
filed with the Securities and Exchange Commission becoming effective.
Operating activities for the quarter ended December 31, 1996 (used)
approximately $(350,571) of net cash as compared to $647,000 cash provided in
the quarter ended December 31, 1995. The decrease in cash from operating
activities was primarily due to the net loss incurred in the current quarter
as compared to the net income in same quarter last year.
Investing activities for the quarter ended December 31, 1996 were exclusively
attributed to the ASHA-TAISUN joint venture. The $217,213 expenditure in the
first quarter represents approximately 19% of the Company's projected current
fiscal year budget for the joint venture project.
Cash provided by financing activities was $556,163 for the three months ended
December 31, 1996. Continued use of the Company's credit line was the
primary source of financing activities for the quarter ended December 31,
1996.
The Company expects to invest an additional $1,100,000 in the ASHA/TAISUN
joint venture during calendar year 1997. The Company has no other commitments
to make material capital expenditures.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities
In December 1996 and January 1997, the Company sold 24 Units, each
Unit consisting of a $37,500 principal amount 8% Secured Promissory Note and
2,678.57 shares of Common Stock, to eight accredited investors for an
aggregate of $880,000 in cash. In connection with such sales the Company paid
H.J. Meyers & Co., Inc. a commission of $62,500 and a non-accountable expense
allowance of $18,000 for its services as placement agent.
With respect to these sales, the Company relied on Section 4(2) of
the Securities Act of 1933, as amended, and Rule 506 of Reguation D
promulgated thereunder. Each investor was given a copy of a Private Placement
Memorandum containing complete information concerning the Company, a Form D
was filed with the SEC and the company complied with the other applicable
requirements of Rule 506. Each investor signed a subscription agreement in
which he represented that he was purchasing the shares for investment only and
not for the purpose of resale or distribution. The appropriate restrictive
legends were placed on the certificates and stop transfer instructions were
issued to the transfer agent.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-K. None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASHA CORPORATION
Date: February 10, 1997 By /s/ Alain J-M Clenet
Alain J-M Clenet
Chief Executive Officer
By /s/ John C. McCormack
John C. McCormack
President and Treasurer
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically